US private employers added only 44,000 jobs in July, according to the latest ADP National Employment Report, a figure that came in well below economists' expectations of 75,000. The reading marks a significant deceleration from June's upwardly revised gain of 95,000 and represents the smallest monthly increase since January.
The slowdown suggests that hiring momentum weakened considerably at the start of the third quarter, even as wage growth remained resilient and layoffs stayed historically low. The services sector drove nearly all of the job gains, adding 47,000 positions, while goods-producing industries collectively shed 3,000 jobs.
Healthcare and education lead hiring
Healthcare and education continued to be the primary engine of employment growth, contributing 36,000 jobs. Financial activities added 10,000 positions, professional and business services contributed 9,000, and the other services category recorded an increase of 6,000. On the downside, trade, transportation, and utilities lost 8,000 jobs, natural resources and mining declined by 6,000, manufacturing added just 2,000, and construction employment rose by only 1,000.
Smaller firms lead hiring
Hiring was relatively balanced across company sizes, but businesses with fewer than 50 workers accounted for the largest share of new jobs, adding 23,000 positions. Within that group, firms with fewer than 20 employees added 27,000 jobs, while those with 20-49 workers lost 4,000.
Despite the slower pace of hiring, wage growth remained stable. Employees who stayed with their current employers received average annual pay increases of 4.4%, unchanged from previous months. Job switchers continued to enjoy stronger salary gains, with annual wage growth accelerating to 7%—the fastest pace since August 2025.
"Job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market," said Nela Richardson, chief economist at ADP. "Typical hiring patterns, meanwhile, are changing as employers react to shifting macroeconomic conditions."
Context from other labor market data
The ADP report follows Tuesday's Job Openings and Labor Turnover Survey (JOLTS), which showed available positions fell by 178,000 to 7.359 million at the end of June, largely reflecting weaker labor demand in healthcare and social assistance. However, the JOLTS report also indicated that employers stepped up hiring during June while layoffs remained subdued, reinforcing the view that the labor market is cooling gradually rather than entering a downturn.
Economists noted that layoffs remain well below historical averages and lower than a year ago, indicating employers are generally retaining workers despite weaker recruitment activity. These indicators are being closely watched by the Federal Reserve as policymakers weigh persistent inflation pressures against signs of softer employment growth.
While most Fed officials have expressed confidence in the labor market, inflation remains their primary concern. The central bank has kept interest rates unchanged, though financial markets continue to price in the possibility of another rate increase later this year if inflation fails to ease.
Attention now shifts to Friday's official employment report from the Bureau of Labor Statistics. Economists surveyed by Dow Jones expect the US economy to have added 83,000 nonfarm jobs in July, up from 57,000 in June, while the unemployment rate is forecast to remain unchanged at 4.2%.
For more on how these trends might affect specific sectors, see our analysis on AMD's AI-driven growth prospects and the broader Q2 GDP and inflation data.
This article is for informational purposes only and does not constitute financial advice.
